Finfacts XXIV – No. 418
June 6, 2024Market Rates
Recent Financings
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Advisors
Evan Kinne
Managing Director, GSP; CEO, AXCS Capital
Ed Steffelin
Managing Director, GSP; President, AXCS Investments
Matt Hiller
Director
Edmund Teo
Fund Investment Analyst II
Nick Shapiro
Associate
Rate: SOFR + 600
Term: 12 months, no minimum interest
Fees: 1% in, 0.65% out
Unit releases: 100% of net unit sales proceeds to be paid to the lender, subject to an average minimum principal paydown of $1,600/NSF with associated exit fees (“Minimum Release Price”). Upon the outstanding loan amount being less than $700/NSF on the remaining unsold MR units, the lender shall permit 100% of any proceeds above the minimum release price to be leaked to the borrower as long as the loan reserves are in-balance.
Guaranty: Non-Recourse
$22,955,000 Condo Inventory Financing for a 27-Unit Luxury Condo Property in Los Altos, California
Transaction Description:
George Smith Partners successfully arranged $22,955,000 of condo inventory financing for a 27-unit luxury condo property in Los Altos, CA. The proceeds were used to replace the existing construction loan and to provide additional terms to sell off the remainder of the unsold units. GSP received several term sheets and was able to negotiate attractive terms for the borrower.
The borrower is an expert in this submarket and has a proven track record of delivering high-quality projects. Their expertise and reputation allowed GSP to secure favorable terms that not only facilitated the refinancing of the construction loan but also provided the necessary runway to market and sell the remaining units. The loan was able to close within 30 days of a signed term sheet.
Pascale’s Perspective
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Cool PCE, Slowing Job Data Spurs Rate Cut Expectations, 10- year at 4.29%
Last Friday’s PCE report was a welcome “cooling” sign to markets. Monthly PCE increased 0.3% with the closely watched core up 0.2%, the lowest numbers since December. This hopefully confirms that the January-February PCE and CPI “hot” spikes were distorted due to year end anomalies. This puts annualized figures in the 2.5% range (still above the Fed’s 2% target).
Speaking of the Fed and the 2% target, last week the Cleveland Fed issued a report indicating that the “final battle” to push inflation down from about 2.5% to 2.0% could take 3 years (see chart below). They point out that many of the Covid era inflation factors (supply chain disruption, massive stimulus) have been mitigated. This adds to the “long slog” narrative as the final push from about 2.5 to 2.0% will be incremental and slow. But let’s not forget that the Fed has a “dual mandate”, low inflation and low unemployment. So, the next rate cut scenario will most likely be spurred by weakening employment numbers and “almost there” price increase levels. This week’s jobs numbers (lower job creation, higher jobless claims) are stoking rate cut expectations. The 10-year Treasury is down 30 bps. Tomorrow, the big monthly jobs report. Next Wednesday, CPI and Fed meeting. Stay tuned…
By David R. Pascale, Jr., Senior Vice President at George Smith Partners.
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